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Chapter 12: Problem 2

Can real GDP rise as per capita real GDP falls? Explain your answer.

Short Answer

Expert verified
Yes, Real GDP can rise as the per capita real GDP falls. This can happen if the population growth outpaces the rate at which the Real GDP increases. In such a case, while the total output increases, the average output per person decreases.

Step by step solution

01

Understanding Real GDP

Real GDP is the measure of total economic production for a country. It's an economic snapshot of a country, adjusted for inflation. It provides a broad view of a nation’s total production.
02

Understanding Per Capita Real GDP

Per Capita Real GDP is the measure of the average level of GDP per person in a country. In simple terms, it’s the Real GDP divided by the total population.
03

Applying the knowledge

Real GDP can rise even as per capita real GDP falls. This would occur if the population of a country was growing faster than its real GDP. In this case, the total output of goods and services (measured by Real GDP) increases; however, the average output per person (measured by per capita real GDP) falls since the number of people in the country has grown at a faster rate.

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